US current account deficit contracts sharply in the fourth quarter

WASHINGTON, March 25 (Reuters) - The U.S. current account deficit narrowed sharply in the fourth quarter, hitting the lowest level in nearly five years, amid a rise in primary income and a reduction in the goods trade deficit partly because of tariffs on imports.

The Commerce Department's Bureau of Economic Analysis said on Wednesday the current account deficit, which measures the flow of goods, services and investments into and out of the country, contracted by $48.4 billion, or 20.2%, to $190.7 billion last quarter.

That was the lowest level since the first quarter of 2021. Data for the third quarter was revised to show the deficit at $239.1 billion instead of the previously estimated $226.4 billion.

Economists polled by Reuters had forecast the current account deficit shrinking to $211.0 billion.

The fourth-quarter current account deficit represented 2.4% of gross domestic product, down from 3.1% in the third quarter. It peaked at 6.3% in the third quarter of 2006.

The deficit narrowed by $69.3 billion, or 5.8%, to $1.12 trillion in 2025. That represented 3.6% of GDP, down from 4.0% in 2024.

The report was delayed by last year's shutdown of the government. President Donald Trump's sweeping tariffs, which he pursued under a law meant for use in national emergencies, have caused large swings in the trade and current account deficits.

The duties were struck down by the U.S. Supreme Court. Trump, however, responded to the ruling by imposing a 10% global tariff, which he said would rise to 15%, and his administration has launched investigations that economists said would result in more duties. He has defended the tariffs as necessary to address trade imbalances and protect U.S. industries, though about 100,000 factory jobs have been lost since January 2025.

The primary income balance swung to a $23.924 billion surplus from a $2.539 billion deficit in the third quarter. Primary income receipts surged to a record high of $405.7 billion from $389.9 billion in the third quarter.

The goods trade deficit narrowed to $241.5 billion from $265.9 billion in the prior quarter. Goods exports rose to a record high of $563.6 billion from $547.0 billion in the July-September quarter. Imports of goods decreased to $805.0 billion from $812.9 billion in the third quarter.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)